On January 17, 2017, the Department of Justice’s Antitrust Division (Division) issued the first update to its 2008 Frequently Asked Questions About the Antitrust Division’s Leniency Program and Model Leniency Letters (FAQ) publication. The FAQ describes the Division’s Leniency Program for antitrust law offenders. While these updated guidelines do not express a radical departure from the Division’s past policies, they reflect a general trend toward narrowing the scope of the Leniency Program and restricting its protections to persons and entities that cooperate fully with the Division throughout its investigation and prosecution of co-conspirators. Because the FAQ was published in the final days of the Obama administration, those interested should be on the lookout for upcoming policy changes that the Trump administration may implement in the months ahead.
Background of Leniency Program
Under the Division’s Leniency Program, corporations and individuals involved in antitrust crimes can avoid criminal convictions and fines by reporting their violations to the Division before their co-conspirators. Because the Division grants only one corporate leniency per conspiracy, corporations are incentivized to apply for leniency as soon as possible after the antitrust violation is discovered. A successful applicant receives a leniency letter, which immunizes it from prosecution. In addition, under the Antitrust Criminal Penalty Enhancement and Reform Act (ACPERA), damages in private actions are limited to actual damages that are directly attributable to the applicant’s conduct in the affected market.
Because a corporation must admit its criminal antitrust violation to the Division in order to be eligible for a conditional leniency letter, corporations and their counsel often do not have sufficient information at the time information about a potential violation is uncovered to know for certain whether an antitrust violation has occurred. In those circumstances, the Division has encouraged corporations to apply for a “marker.” The marker holds a corporation’s place in the line for leniency (usually for 30 days, though the corporation can negotiate a different time period) while the corporation gathers more information to support its application. Because corporations are encouraged to seek leniency at the first sign of wrongdoing, the evidentiary standard for obtaining a marker is relatively low.
Once a corporation has sufficient information to admit it engaged in a criminal antitrust violation, it can submit its formal application for leniency to the Division. The Division will weigh several factors to determine whether to grant a conditional leniency letter, including:
- Whether the corporation took prompt and effective action to terminate its part in the activity
- Whether the corporation and its agents reported the violation with candor and completeness
- Whether the confession is truly a corporate act, as opposed to isolated confessions of individuals
Once the Division grants a conditional leniency letter, a corporation has an ongoing obligation to cooperate with the Division. Only after the Division concludes its investigation and any prosecutions of co-conspirators will it issue a final, unconditional leniency letter to the applicant. In many instances, a corporation will be required to make restitution to private plaintiffs before the Division will issue a final leniency letter.
The new FAQ publication attempts to clarify several issues surrounding the Division’s Leniency Program. The most important new guidance is highlighted below:
- Corporations seeking to apply for a marker must contact directly the Criminal Deputy Assistant Attorney General. This is the only person who has authority to evaluate the request.
- While the standard for obtaining a marker remains relatively low, a corporation must provide the Division with sufficient information to indicate it has begun its own internal investigation. It is not sufficient for a corporation to state that it has been the subject of a government raid or that it has received a grand jury subpoena. The level of detail required to obtain a marker may depend on whether the Division already has initiated its investigation, or if the corporation is raising the potential conspiracy to the Division for the first time. Notably, an applicant can no longer request a short-term anonymous marker, but must instead identify itself at the time the request is made.
- During the investigation, marker recipients often learn that the scope of the reported conspiracy is different from what was initially reported. The leniency applicant should stay in contact with the Division as its internal investigation progresses so that the marker or the conditional leniency letter can be tailored to the scope of the conspiracy reported.
- The Division offers two types of leniency. Under Type A leniency, cooperating officers, directors and employees are automatically eligible for protection under a corporate conditional leniency letter when the Division has not already received information about the potential antitrust violation. Under Type B leniency, they are not automatically eligible for such protections where the Division already knows about the conduct. The new FAQs clarify that Type A leniency will not be available when the Division has received information about the potential antitrust violation from “an anonymous complainant, a private civil action, or a press report.” As a consequence of this clarification, corporations controlled by persons facing individual liability may not seek a marker once news of the potential antitrust violation becomes public.
- A conditional leniency letter binds only the Division, and it does not insulate the corporation from prosecution by other federal or state agencies. This includes other divisions within the Department of Justice. For example, a corporate leniency applicant whose employees bribed a foreign public official in violation of the Foreign Corrupt Practices Act receives no protection from prosecution by any other prosecuting agency, regardless of whether the bribes were made in furtherance of the reported antitrust violation. In addition to disclosing the violation to the Division, leniency applicants should consider whether they also should make a voluntary disclosure of non-antitrust violations to other prosecuting agencies.
- While current directors, officers and employees are generally included in a corporation’s conditional leniency letter, these individuals can be excluded if they fail to fully cooperate with the Division throughout its investigation.
- By contrast, former directors, officers and employees are presumptively excluded from any grant of corporate leniency. The Division may, at its sole discretion, enter into nonprosecution agreements with these individuals if they will be able to provide substantial, noncumulative information to assist the Division in its prosecution of remaining targets, or if their information is necessary for the leniency applicant to make a sufficiently detailed confession of its criminal antitrust activity to be eligible for conditional leniency.
- In order to receive the benefits of the ACPERA, the applicant must fully cooperate with the Division throughout the Division’s investigation.
- A leniency applicant’s obligation to cooperate with the Division and investigate its criminal antitrust conduct extends beyond the activities described in the conditional leniency letter. Under the Division’s “Penalty Plus” policy, if a corporation pleads guilty to an antitrust offense but fails to report an additional antitrust crime, the Division reserves the right to seek a more severe punishment for the additional crime. The severity of the Penalty Plus enhancement will depend on the reason the corporation failed to report the additional antitrust crime. In the most severe circumstances, the Division will recommend that a court consider a company’s failure to report the additional antitrust crime as an aggravating sentencing factor that warrants an upward departure and a sentence above the Sentencing Guidelines range. In such cases, the Division may also recommend that the court appoint an external monitor to ensure the corporation develops an appropriate culture of corporate compliance.
You can read the Division’s full FAQ publication here.